How to Build, Boost and Protect Your Credit Score Before You Buy

Your credit score is one of the biggest factors in getting a mortgage. It affects whether you qualify, your interest rate and, as a result, your monthly payment. The good news is that it’s never been easier to check your credit, and a few steady habits can raise your score and keep it strong.

What Goes Into Your Credit Score?

The FICO score most lenders use ranges from 300 to 850 and is built from five factors:

• Payment history (about 35%): do you pay on time?
• Amounts owed (about 30%): how much of your available credit you’re using
• Length of credit history (about 15%): how long your accounts have been open
• New credit (about 10%): recent applications and new accounts
• Credit mix (about 10%): having different types of credit, such as cards, a car loan or a mortgage

Payment history and the length of your history together make up about half your score. That’s why scores tend to rise with age and time. Younger buyers who are just starting out often have shorter histories, fewer types of credit and lower credit limits, which can hold a score back. Time and good habits fix all of those.

How to Boost Your Score

1. Pay every bill on time. This is the most important habit. Set up automatic payments or reminders so nothing slips through the cracks.

2. Keep your balances low. Try to use well under 30% of your available credit on each card, and lower is better. If you’re carrying balances, pay down the card with the highest interest rate first.

3. Be careful with new credit. Each new application can cause a small, temporary dip in your score. In the months before you buy a home, avoid opening new cards or taking out new loans, like a car loan, unless you need to.

4. Shop for rates in a short window. When you’re comparing mortgage or auto loan rates, do your shopping within a few weeks. Credit scoring models generally count multiple inquiries for the same type of loan in a short period as a single inquiry.

How to Keep Your Credit Strong

5. Think twice before closing old accounts. Even if you no longer use a card, closing it lowers your available credit and can shorten your credit history, both of which can lower your score. Keep the balance at zero instead, especially if it’s one of your oldest accounts.

6. Check your credit reports regularly. Errors happen. Review your reports from all three bureaus (Equifax, Experian and TransUnion) for free at AnnualCreditReport.com, and dispute anything that’s wrong.

7. Be patient and consistent. Building great credit takes time, and rebuilding it after damage takes even longer. Once you’ve earned a strong score, keep up the habits that got you there.

Thinking about buying? We can connect you with a trusted local lender who can review your credit and help you plan your next steps.

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